On July 12th, the European Council decided that Spain and Portugal had failed to take effective action in response to its recommendations to correct their excessive deficits, as required by the EU Stability and Growth Pact.
The ‘excessive deficit’ procedure was therefore put into action for both countries.
The European Parliament then initiated a ‘structured dialogue’ procedure and held a joint hearing on a possible suspension of EU structural funding for these two countries.
This hearing was organised by the Economic Affairs and Regional Development committees, with Commission Vice-President Katainen and Commissioner Corina Creţu on October 3rd in Strasbourg.
The Spanish Minister of Economy and Competitiveness, Luís de Guindos said that Spain is committed to putting an end to its excessive deficit and is “an example of a country that can return to growth within the monetary union.”
He argued that suspending EU structural funding to Spain would be “inconsistent and counterproductive”, would create an “unnecessary stigma” and would “harm the morale of the Spanish people.”
Portugal’s Finance Minister, Mário Centeno, said that “there is no political or economic reason to suspend funds for Portugal and Spain”, as “many of the results of the efforts made by the two countries have yet to appear.”
“The funds are fundamental to support structural reforms,” and suspending them “would only harm the creation of new jobs, undermine investments and alienate people from the European project.”
Members of both committees agreed the EU Commission should propose a diplomatic and symbolic 0% suspension, so as not to harm the economies of the two Iberian countries.
This echoed the view of MEPs who in the October 3rd debate warned that suspending EU structural funding for Spain and Portugal would be counter-productive because it would harm their most vulnerable citizens and poorest regions.
This is not enough, however, and there will be another meeting tonight to discuss the committees’ recommendations to the Conference of Presidents.
Both Spain and Portugal realised a long time ago that being a debtor has its strategic advantages as the fear of default in Brussels overrides the desire to punish. The previous Passos Coelho coalition government eased off applying European austerity measure as election time approached in the autumn of 2015 with zero practical backlash from Brussels.
The current government is safe to follow a similar path with its socialist agenda boosting wage rates and lowering VAT for the restaurant trade. Everyone involved in 'punishing Portugal' is now involved in little more than 'saving face'
Comments
For "structured dialogue" read "We are in so deep that we will have to throw more taxpayers' money at them or go bust, plus if we don't they'll go for Pexit and Sexit.